Indo-Nepal growth: Greater economic interaction for mutual progress

The substantial presence of ethnic Nepalese people in North-east India is an asset to promote greater economic interaction with the neighbouring country Nepal.

Rangan Dutta | New Delhi | May 6, 2019 2:33 pm

Picture from unspecified location in Nepal. (Photo: iStock)

“Reimagining Indo-Nepal relations” was the theme of a consultation organised at New Delhi recently by the India Nepal Centre at PHD Chamber of Commerce and Industry under the guidance of KV Rajan, who had served as the Indian Ambassador to Nepal during a critical period of time in Indo-Nepal relations. Nilambar Acharya, Ambassador of Nepal in India, and Krishna Hari Pushkar, Minister (Economic), Embassy of Nepal, led the discussion, which was attended by a diverse group involved directly or indirectly in Nepal or interested in its progress.

Initiating the dialogue, Rajan pointed out that in the backdrop of the unstoppable march of globalisation, it’s time that India and Nepal adopted a mutually supportive development strategy and argued that in the ultimate analysis, geo-economics shapes geo-politics. Acharya stated that India and Nepal are uniquely positioned to work out such a complementarily and stressed the importance of the Indo-Nepal Business Summit at Kathmandu. He also invited PHDCC to play a leading role in attracting diversified Indian investment to Nepal apart from the traditional areas of Indo-Nepal cooperation such as hydel power or road construction and other infrastructure projects.

Acharya reminded everyone present that the creation of gainful employment opportunities for the youth by transforming the economy from one driven by remittances, which account for roughly 30 per cent of the Nepalese GDP now, to one producing value-added products and services for the domestic as well as markets in the country’s neighbourhood is the core of Nepalese development strategy. Acharya said that harnessing Nepal’s potential in the medium, small and micro enterprise sector and diversifying the service sectors while deepening and broadening its traditional strength in tourism, are the priorities.

There is a huge scope for developing and upgrading the healthcare sector of Nepal by collaborating with established Indian corporate players, which could attract not only foreigners but also Indians from the neighbourhood. This will need a coordinated approach involving the Indian states to cover the sub-Himalayan region. The success of the Manipal group of Karnataka in establishing a high class medical college and hospital in Sikkim might be seen as a case of how outside expertise could help establish modern health care to serve not only Sikkim where it is located but also areas of east Nepal, Bhutan, North Bengal and even, the North-east.

Quality school education was also identified as a potential growth area in the consultation as presently well-off Nepalese, like their counterparts in Bhutan, send their children to boarding schools in Darjeeling and Kalimpong in West Bengal or Shillong in Meghalaya even when, with some good planning and investment, Kathmandu and some towns of Nepal could emerge as “education hubs” for the region opening up employment opportunities for the educated youth in the process.

Tourism, already the largest industry in Nepal with a 7.5 per cent share of the GDP earning US$ 472 million annually, has vast untapped potential. As per official statistics 1.7 million foreign tourists from Western countries visited Nepal last year — a big rise from the 753,000 in 2016. A sharp rise in the number of Chinese tourists has also been seen. It suggests the scope of expanding tourism infrastructure and especially Buddhist tourism circuits — a point stressed by MP Bezbaruah, a former tourism secretary of Government of India.

However, being urban-centric, the development of these sectors is unlikely to generate a growth momentum in the economy strong enough to uplift 65 per cent of the population who are in rural areas, often in isolated habitats far away from the market and dependent upon agriculture and allied activities. This unique feature of the Nepalese economy is apparent when one looks at the map and notes that its geographical area of 147,181 sqkm is a part of the vast sub-Himalayan region covering Bhutan and the Indian states of Sikkim, West Bengal, Assam and other parts of the North-east region.

In geo-economic terms, the Nepalese economy is integral to the economies of this sub-region. The Bhutan, Bangladesh, Nepal and India Cooperation Initiative is founded on this fact of interdependence. The substantial presence of ethnic Nepalese people in the region, after the introduction of the colonial mode of production and administration, is, in the present context, an asset to promote greater economic interaction between Nepal and the North-east for mutual progress. Thus from a geo-economic angle, building a Nepal-Bengal-North-east economic corridor for leveraging economic activities in Kathmandu-Siliguri- Guwahati-Imphal seems not just desirable but a sub-regional development imperative well within India’s Act East Policy.

From this perspective, the region’s untapped agricultural potential can spawn regional demand-driven crop diversification and agrobased industries. Nepal’s existing base in the MSME sector in value added dairy products, cotton and synthetic textiles, hide and leather goods, jute products and medical herbs, enabling its exports to rise to US$ 817.7 million in 2017, has huge untapped potential because of a vast market for those products in the neighbourhood. This has a bearing on future development as, in 2017, Nepal’s imports were at US$11.03 billion because of its dependence on imports of oil and petroleum products, medicines, electrical machinery and equipments, which is really not sustainable unless export earnings go up substantially.

Considering this position, Acharya urged the PHDCC to mobilise Indian investment in Nepal in the quick maturing projects with larger employment potential, which could kick start the economy. He preferred joint ventures in sectors like agro forestry, fruit preservation in small and medium industries mode for quick value addition for a market that already exists in the sub-region.

While broadly agreeing with this approach, especially the need to create entrepreneurial dynamism in Nepal through joint ventures, a consensus was also reached at the consultation that to create an enabling environment for transition to a modern knowledge-based economy with ”high technology intensity”, the application of science and technology inputs are must. A new science, technology and innovation policy is a strategic development need for Nepal. The STI Policy maybe designed to create a network of broad-based science and technology NGOs capable of identifying “technology needs and gaps” at the grass roots in rural areas, and also at the small and micro enterprise levels in urban and peri-urban areas for reference to the research and development institutions concerned.

The task is difficult but not insurmountable. Kathmandu hosts the International Center for Mountain Development, the world’s foremost multi-disciplinary institution for development of mountainous regions. In Dehradun, Almora and Pantnagar in Uttarkhand and Izzatnagar in Uttar Pradesh, we have some of India’s foremost institutions for dealing with scientific issues related to sustainable development of the Nepalese economy. With the necessary will, the technology resource of the two nations could be harnessed to change the economy of the entire sub-Himalayan region including North-east India, which shares many commonalities with Nepal.

(The writer is a retired IAS officer of the Assam-Meghalaya cadre and has served as a scientific consultant in the office of the principal scientific advisor to the Government of India)